Stop Showing The Money, Start Sharing The Values
There are so many initiatives to measure natural, social and sustainable capital that you would almost trip over them. At a recent sustainability congress, a researcher stated that they had identified over 60 methods for measuring sustainability. And that’s probably not even all. There seem to be over 130 initiatives worldwide.
Companies like to pick a method and apply it retrospectively, to mention in their annual report what they have done with regards to sustainability, like the Dutch Railways recently did. If you use natural or social capital evaluation in this way, you’re just using it as an explanation or justification of what you have done. You’re not using it for decision-making upfront. Explaining your achievements is a good first step, but not sufficient. It would be good to raise two fundamental questions about measuring after the fact. Is this really the value you could have achieved? And how transparent is your chosen method and what does it actually measure?
Real Value Is Created Bottom-up
Many companies have established measuring natural and social capital as a goal in itself, at the corporate level. However, impact is realised on a business and operational level. If we want to change the way we work, we have to establish targets at those levels. Right now, those targets often don’t exist. Of course, it’s difficult to determine these targets. The idea of sustainability goals is new and we don’t have established practices to translate corporate targets into operational KPIs. Only then will natural and social capital be taken into account when businesses make day-to-day decisions.
The good news is that we see more and more that the responsibility for achieving sustainability targets is laid down at the business level. Sustainability even shows up in personal targets for employees. That alignment is crucial for creating ownership of shared sustainable values. Making people personally responsible for sustainable targets ensures that employees embed sustainability in their daily work and take control of achieving their targets. Only if that step is taken will we be able to realise the full potential of the natural and social value we can create.
Credibility Requires Transparency
A second fundamental question is how transparent all these methodologies are. Sometimes they can feel like a way for consultants to generate new business. Nearly all big consultancy firms and many smaller ones have developed their own methodologies. Established firms such as KPMG, Deloitte and PwC, to name a few, are working on natural or social capital valuation methodologies. New firms and organisations, such as TruCost and TruePrice, have also developed a method of their own. The WBCSD and IUCN are leading a consortium that is trying to establish a Natural Capital Protocol.
These initiatives all deserve praise, and the work they do is important. The only problem is that these methods are often not very open and transparent. That makes it hard to verify what they do. As long as these methods stay proprietary, measuring sustainability will never become mainstream. The lack of transparency doesn’t help these initiatives’ credibility either. Would we ever accept it if our accounting rules were not transparent and that every accountancy firm had their own rules?
The Time Has Come For A New Business Model
What we should ask ourselves is: what do we want to accomplish with natural and social capital accounting? We’re trying to capture the values of a new, more sustainable world in an old-world model: money. That’s effective, as it gives us something to hold on to when we try to establish what these new values are worth. Monetising natural and social impacts provides a nice reference for what we do.
The challenge, however, is to create a new reference, because we’ve gotten stuck in the old model. We need new definitions of success. That requires new business models: models that value more than just money, models in which value is created collectively, and models that have shared, sustainable value at their core. That’s what we need to work on, from the bottom up, where the real impact is. This work will give us inspiration to do the things we do in a different and better way, together.
We need to replace the good old profit and loss account with a fundamentally different way to determine value. New accounting and reporting rules won’t make the difference. A business model that rethinks value creation will. A fundamentally different way for creating and sharing value, and reinforcing everyone’s position with that shared value. That will help us act smarter.
Sustainability is all about impact. Positive impact makes you meaningful. But first you have to know where you are making an impact and where you can create shared value. That’s where PRé comes in. Pinpointing your impact is an essential starting point for taking joint action with people and organisations in your ecosystem. The combination of sustainability and social business can make a real change in the way we do business.